Menguar means "to wane" or "to diminish," a verb most famously used to describe the moon's phases. It's a key word in this song's hauntingly beautiful final image.
The lyrics say, "Y, si el niño llora, menguará la luna para hacerle una cuna" (And if the child cries, the moon will wane to make him a cradle). This poetic line transforms the moon from a celestial body into a loving mother, creating a powerful and unforgettable ending to the tragic legend.
This song tells a dark and beautiful fairy tale. It's a legend about a gypsy woman who makes a deal with the moon. She desperately wants to marry a gypsy man, so she prays all night, "Llorando pedía / Al llegar el día desposar un calé" (Crying, she asked / when day came, to marry a gypsy man). The moon agrees, but demands a terrible price: her firstborn child. The moon seems lonely itself, with the chorus asking, "Luna, quieres ser madre / Y no encuentras querer que te haga mujer" (Moon, you want to be a mother / and you can't find a love to make you a woman).
The woman gets her husband, but when their son is born, he has pale skin and grey eyes, "Blanco como el lomo de un armiño" (White as an ermine's back). The husband, believing he's been cheated on, flies into a rage. In a truly tragic turn, he kills his wife and abandons the baby in the mountains. The moon then adopts the child, and the legend says the moon's phases are now tied to the baby's moods. When the moon is full, the baby is happy, and when he cries, the moon wanes to become a cradle for him, "menguará la luna / Para hacerle una cuna" (the moon will wane / to make him a cradle).